Unsafe water takes a huge toll on people in the developing world. Where clean water for drinking, cooking and cleaning, and basic hygiene is rare, it’s all too easy to catch life-threatening diarrhea from contaminated water. People need clean water to stay healthy, but who should provide it?

In some places, private providers may help increase access to safe, improved water and sanitation services, says Katrina Kosec, an IFPRI research fellow who wrote a discussion paper on the topic. Whether the private sector should be allowed to provide such basic services is controversial. But when Kosec drilled down into health and water management data from 39 African countries, she found that privatizing urban water supplies led to a 30 percentage point increase in access to piped water—a 42 percent increase over the average rate of access.

Fewer Cases of Diarrhea

Privatizing water services had an important ripple effect: It reduced the share of urban children under five who had diarrhea in the previous two weeks from about 20 percent to 14 percent—a decline of about a third. Privatization improved health the most for children from the poorest households. “What was most striking,” says Kosec, “was the sheer magnitude of these effects.”

Bringing in private firms to manage water helps improve access to water by expanding the use of piped water, which lowers the prevalence of diarrhea, Kosec concluded. Other research has shown that people with piped water have higher-quality water at the source, use more water, and are less likely to store water in containers—all practices that reduce the risk of diarrhea. Improved access might mean that someone who once had to draw water from a well that contained excreta, bugs, and other contaminants and lug it home can now get quick access to piped water by just turning on the tap at home or visiting a nearby public standpipe.

A Viable Option

The effect of privatizing water services varies by setting. It’s likely that the size of the effect depends on the political and institutional climates where the privatization takes place. Where governance is strong, privatizing may not improve access to water. But if health problems are rampant, the public water sector is failing, and the government lacks money to invest in water services, privatization may be a viable option.

But can dysfunctional governments pick good water companies? Kosec is cautiously optimistic. As soon as there’s competitive bidding for contracts, rather than sole sourcing, a firm’s ability to offer kickbacks to the government shrinks. “The hope,” says Kosec, “is that competition among firms to win a water contract will lead the winner to provide abundant, clean water.”

Although South Asia has the highest concentration of undernutrition in the world, in the past two decades Bangladesh and Nepal have both achieved striking improvements in the nutrition of their citizens. How did they do it?